Wednesday, September 24, 2008

Louis Navellier: It's become a long term loser. Details to follow.

I've been a subscriber to Navellier's Q[REMOVED] G[REMOVED] for years and, in the first, it did rather well. Not as well as his advertising would have you believe, but well enough to be virtually my sole source of investing advice. (I initially spreadsheeting the two years before the date I first subscribed to arrive at that opinion. The average then was a growth rate of around 0.8% per week, and I could live with that happily.)

Well, in the volatile market going back well over the last year, his advice has led to dreadful losses. He even brags in each newsletter about the wonderful performance in that week of a couple of picks, ignoring the fact that those same picks are in the red starting from their prices in the week they were first added to the list.

Needless to say, I stopped using his recommendations quite some time ago, but I still update my spreadsheet religiously each week. (I bought a multi-year subscription at his discounted price, which is why I still receive it -- not through choice, now.)

I will be posting a number of details. This first is a summary of total performance.

My spreadsheet uses the following model:

  1. Since one cannot buy/sell at the closing price on the date of the newsletter's publication -- it comes out after the market close on the first trading day of the week -- I use the next day's open for all stocks added or dropped with that issue. Otherwise, I use the issue's prices.

  2. I presume stocks stopped out are, indeed, sold at the stop price, with one caveat: If the stock gapped down through the stop price overnight, I use the next day's open. This is a rare event, however.

  3. The spreadsheet structure is equivalent to an initial portfolio worth that is equal-dollar invested in all his recommended stocks, and that it is rebalanced to that with every issue. (I also have the ability to test the effect of using just the top N stocks, and it used to be that using the top 12 or so gave a somewhat better result -- back when his picks were making money at all.)
So, the first posting: A summary of performance over the last 52 weeks as of his 22 September 2008 edition:

A loss of 41.6%!! (And that's after a good week, which saw a gain of 6%.) This works out to a base loss of just over 1% per week, compounded for 52 weeks.

Over that same period, the S&P500 lost 20.47%

I also tested a model that invested only in the newly added stocks each week, dollar balanced of course -- which meant staying in cash in a week where no stocks were added. You will see a difference between this and results using the prices in his newsletter since I use the open price the next day. In the past, when there were many brokers using his advice to issue buy recommendations to their clients, that opening price would pop, but that has become less of an issue as fewer and fewer do so.

In that "only new adds" model, the last 52 weeks show a loss of 64.5%, or a weekly mean loss of almost 2%.

Well, that strategy doesn't work.

In posts to be added, I will show the performance of the stocks he raves about. To avoid any semblance of copyright infringement, I'll just call them stocks A, B, C, etc., until they are no longer among his recommendations.

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